Scheef & Stone, LLP’s Direct Selling & Multi-Level Marketing practice is one of the most recognized and experienced in the United States. Led by Partner Brent Kugler – a nationally prominent attorney in the direct selling industry with more than 23 years of experience and a former General Counsel of a large MLM company – our practice provides comprehensive legal representation to direct sales, multi-level marketing (MLM), and network marketing companies of all sizes, from start-ups structuring their first compensation plan to established industry leaders defending high-stakes regulatory actions and litigation.
The direct selling channel is one of the most legally complex business models in operation today. Companies operating in this space face a uniquely demanding legal environment shaped by active and evolving federal regulatory oversight from the Federal Trade Commission (FTC), scrutiny by state attorneys general, a steady volume of distributor-related litigation, aggressive competition for sales force talent, and increasingly sophisticated consumer class actions. Navigating this environment demands counsel with deep, specialized knowledge – attorneys who understand not only the law but the industry itself.
At Scheef & Stone, we bring that combination. Brent Kugler is a recognized thought leader in the industry, a frequent speaker at Direct Selling Association (DSA) conferences and summits, a contributing columnist for Direct Selling News, the industry’s leading trade publication, a Supplier Member of the DSA, and a sought-after expert witness and mediator in direct sales disputes. His background as in-house general counsel provides our clients with a rare insider’s perspective on the operational, regulatory, and litigation pressures unique to this industry.
The FTC has intensified its scrutiny of direct selling companies in recent years, issuing updated Business Guidance Concerning Multi-Level Marketing in 2024 and proposing new rulemaking targeting income and earnings claims. The agency has made clear that it will aggressively pursue companies it believes operate as illegal pyramid schemes, focusing on whether a company’s
compensation structure incentivizes recruitment over legitimate retail sales to end consumers, and it views income and “lifestyle” claims by distributors, including on social media, as potential sources of company liability.
Brent Kugler has closely tracked and publicly commented on the FTC’s evolving position, including the agency’s 2024 letters to the DSA and the Direct Selling Self-Regulatory Council (DSSRC) that disavowed the FTC’s prior guidance and signaled a broader reading of what constitutes an illegal pyramid scheme. He has noted the significance of the Northern District of Texas’s ruling in FTC v. Neora, in which the court rejected every single claim the FTC brought, including its pyramid scheme allegations, while cautioning industry participants that the FTC will adapt its litigation strategy in future enforcement actions. Our attorneys help companies understand and anticipate the FTC’s current enforcement posture and take meaningful, proactive compliance steps before a government investigation begins.
Our Direct Selling & Multi-Level Marketing practice provides end-to-end legal support across every aspect of a direct sales company’s operations and legal needs:
Regulatory Compliance & FTC Counseling
We advise direct selling companies on compliance with FTC regulations and guidance governing compensation plan structure, pyramid scheme avoidance, income and earnings claim disclosures, and lifestyle claim standards. We help companies evaluate whether their compensation plans and marketing materials satisfy applicable legal standards and develop compliance programs designed to withstand regulatory scrutiny.
Compensation Plan Review & Design
A legally sound compensation plan is the foundation of a compliant direct selling company. We review and advise on the design of compensation plans, including commissions, bonuses, rank advancement structures, and qualification requirements, to help ensure that these plans reward legitimate retail sales activity and do not inadvertently create the incentive structures that the FTC associates with illegal pyramid schemes.
Distributor Policies & Procedures
We draft, review, and update distributor agreements, policies and procedures manuals, consultant agreements, and independent contractor agreements. These documents form the contractual backbone of the company’s relationship with its sales force and are critical both to operational success and to legal defense in disputes with distributors and regulators alike.
Independent Contractor Classification
The classification of distributors as independent contractors rather than employees is one of the most significant and actively contested legal issues in the direct selling industry. Brent Kugler has spoken at DSA conferences on this topic for years and has advised numerous companies on policies, compensation structures, and operational practices designed to support independent contractor status in the face of evolving federal and state tests and increased scrutiny from the Department of Labor and the IRS.
Income Disclosure Statements
Income Disclosure Statements (IDS) have become a primary focus of FTC review. We help companies prepare and present accurate, FTC-compliant income disclosures that show the actual earnings of typical distributors, including those who earn little or nothing, and that meet the FTC’s 2024 guidance requirements without harming the company’s ability to attract new participants.
Product Claims & Advertising Compliance
Direct selling companies, particularly those in the health, wellness, skincare, and nutritional supplement space, face significant regulatory risk from product claims made by distributors in marketing materials and on social media. We advise on substantiation standards for product efficacy, health, and safety claims; help companies create pre-approved marketing templates and social media policies; and defend against FTC and FDA enforcement actions based on distributor-generated claims.
Sales Force Raiding & Distributor Disputes
Protecting the distributor base is one of the most urgent and time-sensitive legal needs a direct selling company faces. We have extensive experience obtaining temporary restraining orders and preliminary injunctions to stop competitor companies from raiding sales forces and prosecuting breach of contract, trade secret, and non-solicitation claims against departed distributors and competing companies that actively recruit them. We have successfully prosecuted proceedings to obtain distributor information from major online platforms and auction sites to investigate and stop unauthorized product sales.
Litigation & Arbitration Defense
Brent Kugler is a seasoned trial lawyer who has successfully represented parties in lawsuits, arbitrations, and regulatory actions across the United States on both sides of the docket. In 2025, Brent tried a three-day bench trial in the U.S. District Court for the District of Nevada over a fraudulent MLM video streaming investment, winning a substantial judgment for the firm’s investor clients that included punitive damages after the court found the defendants’ testimony contradictory and their accounting incomplete. The court also pierced the corporate veil, holding the company’s two principal owners personally liable. Earlier victories include the successful defense of a significant arbitration claim, favorable outcomes in numerous distributor disputes, and the defense of more than 40 product liability lawsuits involving nutritional supplements. Scheef & Stone represents both companies and individual clients in RICO claims, class actions, securities claims, breach of contract disputes, and complex commercial litigation related to all aspects of direct selling operations.
Witness, Mediation & Arbitration Services
Brent Kugler’s deep industry knowledge and experience make him a sought-after expert witness in litigation involving MLM companies and a highly qualified mediator and arbitrator for direct sales legal disputes. His background on both the in-house and outside counsel sides of the industry gives him a unique perspective that parties and tribunals value in complex, industry-specific disputes.
Business Transitions & Start-Up Counsel
We advise companies transitioning from a traditional retail model to a direct sales model, as well as entrepreneurs launching new direct selling ventures. This includes guidance on entity structure and formation, state registration and business opportunity law compliance, initial compensation plan design, distributor agreement drafting, and the operational and compliance infrastructure needed to launch a legally sound direct selling program.
Governmental Affairs & Risk Management
We monitor federal and state legislative and regulatory developments that affect the direct selling industry and advise clients on how to position their businesses in response to an evolving legal environment. Our attorneys help companies develop enterprise-level risk management programs that address the full spectrum of regulatory, litigation, and operational risks inherent in the direct selling channel.
Recent Results & Industry Recognition
$1.56 Million Judgment — MLM Fraud, Mary Jane Beauregard and John Hugh Smith v. Clayton Sampson, et al., U.S. District Court for the District of Nevada (2025)
Following a three-day bench trial in Las Vegas, Brent Kugler secured a judgment totaling more than $1.56 million for investor clients who were defrauded in connection with a multilevel marketing video streaming venture. The court found in favor of the plaintiffs on claims of common-law fraud and securities fraud, pierced the corporate veil to hold the company’s two principal owners personally liable, and awarded $750,000 in punitive damages, citing the defendants’ contradictory testimony, incomplete accounting, and the need to deter similar misconduct. Associates Haley Jones and Abbye West provided critical support in preparing the case for trial.
Featured Columnist — Direct Selling News, September/October 2025
Brent Kugler was featured as a columnist in Direct Selling News, the direct selling industry’s leading trade publication, in its September/October 2025 issue, with an article titled “What Direct Sales Companies Must Prepare For.” Drawing on his experience as both former General Counsel and regulatory counsel, Brent identified three emerging legal threats facing MLM businesses in 2026: the FTC’s heightened scrutiny of online enrollment processes and clickwrap agreements; the agency’s proposed Earnings Claim Rule and its expanded requirements for income disclosure; and the FTC’s increasingly subjective approach to pyramid scheme determinations, which he illustrated through the agency’s litigation strategy in FTC v. Neora.
